Mandatory disclosure and financial contagion

This paper examines whether forcing banks to disclose balance-sheet information that they choose not reveal can improve welfare. We show mandatory disclosure welfare when are vulnerable contagion due interconnectedness. In our benchmark model, is beneficial only if markets frozen. When we modify the model incorporate moral hazard, also in normal times, but as long there some potential for contagion. Contagion essential because it implies fail internalize benefits of others and too little equilibrium. Finally, argue may be a substitute financial reforms rather than complement, since these mitigate makes beneficial.